RBS to cut back on investment banking operations

Royal Bank of Scotland (RBS) will drastically cut back on its investment banking operations, withdrawing from 25 countries across Europe, Asia and the Middle East and allowing the state-controlled lender to refocus on lending in the UK, Reuters reported.

It has been seven years since RBS started  scaling down its operations, shedding over £1-trillion in assets as it retreated from the acquisitions that once made it the largest bank in the world and an enormous financial burden for UK taxpayers when the credit bubble burst in 2008.

The lender posted a 2014 loss of £3.5 billion yesterday, after it was hit by a write-down on the value of its US business and new charges relating to foreign exchange investigations and mis-selling.

Last year's loss came as a huge improvement on the £9-billion deficit it had run up in 2013, but RBS has not yet been able to turn in an annual profit since the financial crisis. It has lost £49.5 billion over that period, more than the £45-billion taxpayers paid to bail it out in 2008.

In a bid to boost capital and generate better returns, chief executive Ross McEwan said the bank's investment banking division would shrink its presence in Asia significantly and withdraw from central and eastern Europe, Africa and the Middle East, cutting jobs and 60 per cent of assets.

According to McEwan, he wanted to be quite clear this marked the end of the stand-alone global investment bank model for RBS, McEwan said.

Rory Cullinan, RBS's highly regarded restructuring chief, would become chairman of the corporate and institutional banking (CIB) division to oversee the retrenchment.

The revelation comes as the bank reported falling losses for 2014 as its cost-cutting programme overtook decline in revenues, City AM reported.

The bank lost £3.5 billon in the year, down from £9 bn in 2013 and its lowest annual loss since it was bailed out.

In a turnaround, its operating profits from the core business swung from a £7.5-billion loss in 2013 to a £3.5-billion profit.

However, the figures were worse than projected, with the lender racking up another £2.2 billion of conduct and litigation charges, including an extra £400 million in Payment Protection Insurance (PPI) redress costs, despite earlier hopes the problem was almost over.